NYC Council Finance panel approves $500M Hudson Yards bond issue

The New York City Council’s Finance Committee on Wednesday approved up to $500 million of bonds to back additional financing by the Hudson Yards Infrastructure Corp.

The finance panel, under the chairmanship of Daniel Dromm, voted 9-0 to approve a financing that will implement Phase 2 of the development on Manhattan’s Westside and expand the Hudson Boulevard and Park three blocks north to West 39th Street from West 36th Street. The full Council is slated to vote on the bond issue later in the day.

The boundaries of the Hudson Yards Financing District in Manhattan are approximately from West 29th and West 30th Streets in the south, 7th and 8th Avenues in the east, West 42nd and 43rd Streets in the north and 11th and 12th Avenues in the west.

Construction continues at Hudson Yards on Manhattan’s West Side.

Chip Barnett

Since 2001, the city, the state and the N.Y. Metropolitan Transportation Authority have worked to create a redevelopment program to transform the Hudson Yards area into a transit-oriented, mixed-use district.

Two entities make up the HYFD: the Hudson Yards Infrastructure Corp. and the Hudson Yards Development Corp.

The HYIC, formed in 2004, is a local development corporation created to finance infrastructure improvements and related construction costs at Hudson Yards. The HYDC, formed in 2005, is a local development corporation created to manage the redevelopment process of the Hudson Yards.

In 2005, the Council approved a $3 billion plan for financing Phase 1 of the infrastructure improvement for the HYFD.

The Phase 1 plan provided that payments in lieu of property taxes, or PILOTs, from the area would be used to fund the infrastructure improvements; it said that the Council would make sure that interest payments on the debt to fund the infrastructure improvements were made until revenues from the development were sufficient to make the payments; and approved the use of the city’s Transitional Finance Authority to provide credit support for a some of the debt issued, subject to unanimous approval of the TFA Board.

N.Y. City Council/Emil Cohen

The resolution passed Wednesday also supports city efforts to pay current interest, subject to appropriation, to the extent not paid from revenues of HYIC on its indebtedness; and authorizes that interest support payments may be made by the city, subject to appropriation, in connection with interest on bonds issued by HYIC to refund or refinance any HYIC bonds for which the city was or is currently obligated to provide interest support.

In May, the HYIC sold about $2 billion of second indenture revenue bonds. The HYIC issued $2 billion of bonds in 2007 and $1 billion in 2012 and proceeds from May’s sale refunded all $2 billion of the 2007 bonds and $391 million of the 2012 bonds.

The deal was rated Aa3 by Moody’s Investors Service, A-plus by S&P Global Ratings and Fitch Ratings. Just before May’s sale, S&P upgraded its rating on the HYIC’s outstanding Fiscal 2012 Series A first-indenture senior revenue bonds to AA-minus from A.

In June, the New York City Independent Budget Office reported that the HYIC needed an additional $96 million to cover higher-than-expected development costs. The IBO said the funding gap came even as the city coughed up $128 million from its capital budget to cover project costs from Fiscal 2005-2016; the city has another $138 million budgeted over the next five years.

The capital costs are in addition to the $360 million that the city has spent to subsidize interest costs on the $3 billion in bonds the infrastructure corporation issued to pay for the project. The HYIC’s 2007 and 2012 bonds financed the extension of the Metropolitan Transportation Authority’s No. 7 subway line and to make other infrastructure improvements necessary for related commercial and residential development in the neighborhood.